Textbook Inflation

Last week Apple Computers announced that it is entering the textbook market with an interactive textbook application for the iPad and software to help authors create digital textbooks on a Mac. Although electronic textbooks have been available for years, Apple’s marketing chief Phil Schiller stated that “education is in the dark ages.” Apple, Amazon, and other producers of tablets and e-readers may re-invent the textbook by encouraging the development of more interactive and effective methods of presenting information on more portable platforms.

The digital textbook market may evolve more slowly than other markets for digital content because instructors and school boards, rather than students and parents, decide which textbooks are adopted. Whether students can choose the most effective and convenient textbooks is influenced by the selections and decisions of instructors.

Professors choose which textbooks are used even though students purchase them. This separation of the selection and purchase decisions may contribute to higher textbook prices. If professors are more concerned about textbook content than prices they may require more expensive textbooks even if they are only marginally better for students. Textbook publishers will respond by competing less on price and more on features valued by instructors.

Price competition keeps prices lower, whether the product is a textbook, a prescription drug, or a barrel of oil. The Bureau of Labor Statistics, which calculates the Consumer Price Index, collects price information for a variety of products and services purchased by college students including textbooks, tuition, and dormitory housing. The following chart shows that textbook prices have risen faster than the prices of other goods and services purchased by students, including tuition. College textbooks cost about 39% more than they did five years ago.

The fact that textbook prices are increasing faster than other costs of attending college does not prove that professors ignore their students’ interests when selecting textbooks, but it suggests that features such as test banks and lecture materials may be more important for a textbook’s success than price or convenience to the student. Apple and Amazon will help digital textbooks become more interactive and portable over the next few years. This innovation will be even more effective if professors internalize the preferences of their students when deciding which textbooks to adopt.